YapStone Blog

“Why Paying Rent with a Paper Check Is Still a Thing” written by Mike Denbeau, VP/GM of Verticals & Troy Scarlott, VP Marketing, YapStone.

If you are ‘of age,’ with a few monthly bills and are modestly digitally savvy, it’s safe to assume that you pay most of your bills online. If you need to send cash, you probably haven’t skipped over to the local Western Union branch recently, if ever. You probably use a mobile app, like Venmo or Square Cash, to send some extra cash to your kid brother in college or to pay a colleague for the March Madness pool that you came in 18th place – out of 20. And if you’re up on the latest and greatest FinTech innovations, it’s likely that you use Apple Pay or a digital wallet to buy your groceries instead of inserting that new chip card and waiting, what feels like forever, for it to process.

Yet, 12 times a year on the first of the month, you venture into the great unknown – your desk drawer – to find your checkbook. And then for a brief moment in the digital age, like a member of the “greatest generation,” you fill out a paper check to pay your rent.

Yes, the paper check is still the de facto payment method for paying rent in the apartment rental market – despite the fact that FinTech platforms and products are dramatically impacting and disrupting many long standing industries.

Paper Checks: a history lesson

Before September 11, 2001, money moved around the United States in an almost unfathomable manner. Banks loaded checks into large trucks and carted them off to central processing centers to be sorted and bundled – before being put onto an airplane. On any given day, $6 billion was flying over our heads.

That all changed after 9/11. The Check 21 Act was passed, which allowed banks to use images of a check, rather than actual paper. A study by Federal Reserve Bank of Philadelphia estimates that banks are now saving $1.2 billion a year by moving to electronic processing, and U.S. businesses are also netting $2 billion in savings from faster payment processing.

The apartment rental market still relies on the paper check:

According to the Wall Street Journal, writing a check costs as much as five times what an online payment does. Today, over 43 million people in the U.S rent an apartment or single family home – and an estimated 90 percent of renters still pay rent with a paper check. The reliance on a product that was invented for the modern era, in circa 1774, causes a number of payment and processing issues – from postage costs, lost checks, late fees, bounced checks and a significant loss of productivity due to the number of hours spent processing paper checks the old fashioned way.

So, why still pay rent with a paper check? Let’s examine the main reasons.

  1. Majority of apartment managers and landlords only accept paper checks. There are an estimated 20 million independent landlords in the US and most are still very comfortable with the current business paradigm of relying on paper checks. Although most millennial renters would rather pay rent online, they are forced to go to the bank once a year, stand in line and get 12 counter checks (to pay rent) because of their landlord’s payment requirements.
  2. Renters want control and the “float” period. Many renters still want the feeling of control when it comes to paying the single largest bill of the month, usually rent, and paying with a paper check on the first of the month fits the bill. Renters also rely and use the “float period” to make sure they have enough money in their bank. Usually, it takes 2-3 days to process a paper check.
  3. Old habits die hard. Both landlords and renters have been paying rent with paper checks for decades – approximately 20 billion checks were written to pay bills last year. As they say, “if it ain’t broke, don’t fix it” – and many believe that this is still the case.

The Game Is Changing

Douglas Elliman Property Management, one of NYC’s largest property management firms, understood this problem on a very profound level. With 40,000 apartment units under their management, the leadership set out to improve the company’s efficiency and productivity.

In 2012, they began working with RentPayment™- Powered by YapStone, an online payments platform in which property managers can accept electronic rent payments. Through RentPayment, renters can pay one of their largest, non–discretionary monthly bills quickly, easily and securely. More importantly, renters can finally get rid of the checkbook and pay rent based on personal preference – online, mobile app, by phone, via text message with a credit card, debit card or eCheck.

Douglas Elliman Property Management, processed roughly a billion dollars in electronic payments through nearly half a million transactions. According to Jim O’Connor, President of DEPM, “Offering an electronic payment option has enabled Douglas Elliman to reduce delinquencies, improve cash flow and save time. This allows our managers more time to attend to other property issues, and our administrative staff to focus on other tasks within the office.”

RentPayment partners with 900+ property management companies representing 24K+ properties and over 3 million rental units. In 2015, RentPayment processed more than $5 billion in ‘rent’ payment volume making it the leading payment solution in the industry.

The physical world of paper checks will eventually go away –replaced by innovative FinTech products that will deliver the convenience, ease and simplicity that today’s renter (and consumer) want. And like any seismic shift in how we do things in our day-to-day lives, “consumer demand” will be the unstoppable force driving change. In 2016, there is an estimated 73 million millennial aged residents that range in age from 20-34. It’s no surprise that this age group dominates the U.S. rental market. With their size and influence, millennials are dictating digital and social trends and this group will also change entire industries. With 16 years experience in the apartment rental market, we believe that millennials are the game changing generation when it comes to paper checks and rent. They want to pay rent one way – mobile first, debit first. In a recent survey, less than 50 percent of millennials own a checkbook…and in the same survey, none prefer to pay by check. That’s nada, zero, zilch. With this sentiment, major banks, such as Citibank and Bank of America have taken notice, and now offer checking accounts – 100 percent online “with no checks.”

Anyone remember the days of going to Blockbuster to rent a video? A little known (at the time) online company called Netflix understood and delivered what consumers wanted, and ultimately drove Blockbuster out of business. The same trends are now moving into the apartment rental industry. The ability to pay rent online (without a paper check or trip to the rental drop box) is now seen as an important amenity to an apartment listing… just check local apartment listings or Craigslist in your area.

The demise of the paper check is upon us. Millennials, smart phones and online payment services are rapidly changing the game. Online rent payments will soon be the rule and not the exception. And you can take that to the bank, mobile app.